Sixel: From here to China and back

Published 9:46 pm, Wednesday, March 7, 2012

It wasn't a hard choice when Neutex Lighting decided to go to China to manufacture LED bulbs and fixtures. It would be cheaper and more efficient, figured John Higgins, president and CEO of the Houston-based company.

But after a couple of years, Higgins started having second thoughts. It took four workers to do one job, which wasn't very productive. There were quality control problems that were difficult to find and fix. Throw in the frequent travel, jet lag and the language barrier, and Higgins began to wonder whether the arrangement was as efficient as he originally imagined.

Then he started noticing retailers such as Starbucks and Juicy Couture popping up in China, which made him consider the role Neutex was playing in the global economy.

"We're developing a middle class in China while killing the middle class at home," he said.

In the end, the decision wasn't all that difficult. Company officials calculated that while a move back to the U.S. might cut margins by as much as 5 percent, it would still be worthwhile.

It's actually turning out to be cheaper in some product lines, said Higgins, who also is introducing more efficient robotic technology.

He expects to launch production next month after equipment is installed, employees are trained and the assembly lines are ready to go - including some specifically designed for workers recruited in the company's outreach to military veterans who use wheelchairs or prosthetic limbs.

The new factory, which once was a medical clinic, was the backdrop for the Greater Houston Partnership's announcement that the Houston area added 195 new and expanded corporate facilities last year, more than any other large metro area. Higgins showed off the new plant near Bush Intercontinental Airport to representatives of the Texas governor's office, Site Selection magazine and economic development agencies.

Neutex started 25 years ago as a logging company, eventually moving into construction as it remodeled shopping centers and built small hotels. Six years ago it morphed into making LED bulbs and fixtures in Houston, but that proved an expensive effort. Raw materials were hard to find because it was such a new technology, he said.

To take advantage of technological advances in China, the company moved its operations to Shanghai and Shenzhen two years later. China was putting money into LED development, and the U.S. still hadn't embraced green manufacturing technologies, Higgins said.

But that changed, and now Neutex officials predict they will have 150 employees in place within the next 12 months. Average wages will range from $10 to $18 an hour, and workers will receive health insurance.

That's a lot more than the Chinese wages of $400 a month. But Higgins is betting it will take far few workers in the U.S. to get the work done, especially with the technological investments he is making. He's also hoping to make 90 percent of the components in Houston within the next 24 to 36 months.

Once the company decided to bring the work back to the U.S., the next big decision was where to put it. Neutex received attractive incentives from Pennsylvania, Michigan and Georgia as well as San Antonio, Bryan-College Station and Angleton.

The company's hometown of Houston didn't offer any incentives - and Higgins didn't ask for any - but in the end, it was the best choice because of its transportation infrastructure, well-trained workforce and supportive business and government leaders.

One of the biggest hurdles is finding loans and investors locally. The financial community in Houston is familiar with the oil patch and real estate, but it doesn't have that same expertise in energy efficiency industries, Higgins said.

He said Wall Street investment houses aren't interested either until a company surpasses annual sales of $30 million. Before it shut down its production lines in China last year, Neutex had annual revenue of about $6 million.

In a bit of a turnabout, Higgins said he is working on getting funding from three investor groups from China that, in exchange for investing a minimum of $500,000 and creating 10 full-time U.S. jobs, can obtain U.S. immigration papers.